Privacy of a living trust

The terms of a “living trust” are contained in a private document while the terms of a will, including beneficiary designation, become a matter of public record once the will has been filed with the probate court.  In addition, other information filed with the court during the probate process, such as the inventory of assets and the written account of all receipts and disbursements of the estate, also become matter of public record.  The administration of a living trust is generally not made public.

 

Control

The absence of any requirements to file a will or any other reports with a court increases the independence and control of the trustee, relative to an executor.

 

Lower Costs

The typical components of cost in the probate process are:

    -Court Costs
    -Appraisal Fees
    -Executor’s Commissions
    -Attorney Fees

Appraisal fees will typically be incurred in probate for real property, and may be incurred for other “hard to value” assets such as expensive artwork or closely held corporations.  These costs would typically not be required by a “living trust.”  If, however, the decedent’s assets are of such value that an estate tax return must be filed (which will almost always be the case) if may be prudent for the trustee of a “living trust” to secure appraisals of those assets to help establish value for estate purposes.  Appraisals also aid establishing the basis of the assets for federal income tax purposes.

Executor’s commissions are set by state law and are based, generally, upon the value of the assets of the estate.  At present, the commission average four percent (4%) of the value of the assets (combined with the income on those assets) depending on the nature, amount and title of the assets at death.  However, surviving spouses and other family members often serve as executor and may waive these commissions.  A trustee of a “living trust” is generally entitled to a fee for services performed which are similar to those performed by an executor, although the level of compensation is not set by law.

An executor may hire an attorney to assist in the administration of a probate estate.  Similarly, a trustee may hire an attorney to assist in the administration of a “living trust” following the death of the grantor.  If the terms of the “living trust” do not require the preparation of an inventory or the preparation of accounts, as typically they do not, the attorney fees will generally be lower for services to the trustee because time related to probate filings will not be incurred.  However, the cost of attorney advice and services with regard to income tax and estate tax issues is likely to be equivalent whether provided to the executor of a will or to a trustee.

Speed of Transfer

A trustee could begin making distributions of assets to beneficiaries moments following the death of the grantor.  An executor cannot make distributions until he or she is appointed by the court after the will is admitted to probate, but this appointment generally occurs within days after death and, once appointed, the executor is legally empowered to distribute all the probate assets to the beneficiaries.  However, it is not necessarily prudent for either a trustee or an executor to immediately distribute assets.

Distribution of assets to beneficiaries is usually delayed in probate because the executor is personally liable for claims of creditors left unpaid by the estate because assets have been distributed to beneficiaries.  The executor is also personally liable for unpaid federal and Ohio estate taxes.  The trustee of a “living trust” can also be held personally liable for unpaid estate taxes and, in some circumstances, unpaid creditors.

 

Avoidance of multiple probate proceedings

Finally, if homes or other real property are owned in a number of different states, use of a “living trust” may be especially useful to avoid separate probate proceedings in two or more states.